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The CBOE Volatility Index, or VIX, has a "What, me worry?" vibe these days. As the Standard & Poor's 500 stock-market index sells at five-year highs, the market's volatility could be heading toward new lows. The VIX recently traded around 12, and it wouldn't take much action on the downside to plunge through its record low of 9.89, set on Jan. 24, 2007.

If you think the market will continue heading higher, in keeping with many traders who advise against fighting the tape, a low VIX could be an invitation—some might say a mandate—to buy inexpensive call options in preparation for a super-charged rally. A low VIX means options trade without a "greed premium," even if greed looks to be on the rise in the stock market.

Our recommendation: If you're bullish, buy call options associated with the shares of your choice, with strike prices equal to or slightly higher than the stock's price.

Let's consider
FacebookFB -1.2603718096838568%Facebook Inc. Cl AU.S.: NasdaqUSD94.01
-1.2-1.2603718096838568%
/Date(1438376400018-0500)/
Volume (Delayed 15m)
:
43464485AFTER HOURSUSD93.7
-0.31-0.3297521540261674%
Volume (Delayed 15m)
:
3044560
P/E Ratio
91.27184466019418Market Cap
264002337757.685
Dividend Yield
N/ARev. per Employee
1468310More quote details and news »FBinYour ValueYour ChangeShort position
(ticker: FB). The company is scheduled to report fourth-quarter earnings after the markets close on Wednesday. On Friday, investors aggressively bought February $33 calls for $1.08 that expire on Feb. 8, in anticipation Facebook's $31 stock will soon trade above $32. Even if these investors are wrong, they aren't paying much. If Facebook trades up to $35, the calls would be worth $2. If the stock marches to $36, the calls would be worth about $3.

"Rinse and repeat," is how one senior trader described the call trading across the options market.

IF YOU ARE SKEPTICAL that the market will continue to rally, which probably describes those who lost a bundle when Apple fell by $60 a share last week, it makes sense to lock in gains. Facebook's stock is up a cool 20% this year. Nervous types might consider buying the March 25 put for 25 cents and selling the February 35 call that expires Feb. 1 at a cost of 63 cents.

The trade would allow you to lock in some gains should Facebook decline on earnings news. Yet, you would still benefit from modest gains if the stock rallies, according to Stephen Solaka, Belmont Capital's managing partner, although you would have to sell the stock if it tops $35.

NOT EVERYONE IS BULLISH these days. Michael Schwartz, Oppenehimer's chief options strategist, says he is increasingly "strangling" stocks rather than simply selling puts or calls against them, as he did in 2012.

If the stock remains between the strike prices, investors keep the money and the stock," he explains. "But if the stock rises above $41, they must sell the stock, which isn't so bad because the effective sale price would be about $50. If the stock falls below the $40 put strike price, investors are obligated to buy more shares."

If you don't like trading strikes so close to a stock's price, you can select puts and calls with lower or higher strike prices. The shift likely lowers the amount of money received from selling the options, but that is offset by not having to turn over the stock in the event of quick rally.

Even better, the sale of options lets investors realize profits without actually selling their shares.